Franklin Financial Services (NASDAQ:FRAF) Has Announced A Dividend Of $0.32

The board of Franklin Financial Services Corporation (NASDAQ:FRAF) has announced that it will pay a dividend on the 24th of August, with investors receiving $0.32 per share. This means the annual payment is 4.1% of the current stock price, which is above the average for the industry.

See our latest analysis for Franklin Financial Services

Franklin Financial Services' Earnings Will Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Having distributed dividends for at least 10 years, Franklin Financial Services has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Franklin Financial Services' payout ratio of 32% is a good sign as this means that earnings decently cover dividends.

Over the next year, EPS could expand by 15.5% if recent trends continue. If the dividend continues on this path, the future payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of $1.08 in 2012 to the most recent total annual payment of $1.28. This implies that the company grew its distributions at a yearly rate of about 1.7% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Franklin Financial Services has seen EPS rising for the last five years, at 15% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Franklin Financial Services' prospects of growing its dividend payments in the future.

We Really Like Franklin Financial Services' Dividend

Overall, we like to see the dividend staying consistent, and we think Franklin Financial Services might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Franklin Financial Services that investors should take into consideration. Is Franklin Financial Services not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.